FirstWrap commentary – June 2023 Quarter

During the quarter the RBA increased the cash rate another 2 times by 0.25% in May and June. This took the RBA cash rate to 4.1%. Inflation remains a concern and will take some time to ease. Over the next 3 to 6 months there will be over 800,000 mortgages that will be coming off fixed rates that will now be at a higher rate which will result in some constriction in the economy with households having to meet these higher interest rates.

ASX 200 was flat with a marginal increase of 0.36% for the quarter. For the financial year the market was up 9.6% with the market peaking in February 2023 and has been erratic since.

Actions taken through the quarter:

• During the quarter we maintained our overweight cash position but have looked to find credit and fixed income investments that will provide better than cash returns.
• Established a holding in Gryphon Capital Income Trust (ASX: GCI) which pays monthly income and has a current running yield of 8.85% p.a.
• The Metric Master Income Trust (ASX: MXT) was added into the investment strategy for a 5% allocation. This listed investment is trading at a discount to its Net Asset Value (NAV) of $2, has a yield of 7.35% p.a. with monthly income.
• We worked with MA Financial and FirstWrap to get the MA Priority Income Fund added to the FirstWrap investment list so that this fund can be included in the investment strategy from 1^st July.

New Investments Summary

MA Priority Income Fund

MA Priority Income has a target yield of 8.1% p.a. and pays monthly income. It is an unlisted managed fund so not subject to the volatility of listed investments. The funds primary focus is on Australian private credit and asset back securities. The fund has a diversified pool of loans with exposure to over 240,000 loans across a range of industries and borrowers.  MA Financial co-invests 10% into the fund which provides a capital buffer in the event that that there is ever a loss on a loan that loss comes out of the 10% capital buffer. In the 5 year history of the fund this has never happened.

MA Priority Income Fund Investment update attached for full details.

Existing Investments Review

RBA cash rate increased 0.5% over the quarter which will result in an increase in yield for all the fixed income assets and cash within the portfolio.

• Metric Income Opportunities Fund (MOT) Current running yield is 8.87% p.a.
• Metric Direct Income Fund current running yield is 7.35% p.a.
• Gryphon Capital Income (GCI) current running yield is 8.85% p.a.
• Each of these paid 3 distributions into the FirstWrap cash account

We increased the weighting to Macquarie Bank (ASX: MQG) in the quarter adding another 2.5% into the investment strategy. Macquarie Bank also went ex-dividend 15^th May with a dividend due on 4^th July for $4.50 with a 40% franking credit.

We continue to monitor the market closely and looking for the opportunity to add to the existing investment strategy as opportunities present.